If Cream purchases the franchisee's business, what is the basis for determining the purchase price of the tangible assets?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
, and related agreements. You should read these provisions in the agreements attached to this Disclosure Document.**
| Provision | Agreement | Summary |
|---|---|---|
| of first refusal, or there is a material change in terms, we will have an additional right of first refusal. | ||
| (o) Franchisor’s | Franchise Agreement | We may purchase any or all of the assets of your Shop (including |
| option to | – Section 15.D | the Premises, if it is owned by you or one of your owners or |
| purchase | affiliates) upon the termination or expiration of the Franchise | |
| franchisee’s | Agreement. The purchase price will be based upon the net | |
| business | realizable value of the tangible assets in accordance with the liquidation basis of accounting. We may exercise this right by giving you written notice of our election within 30 days after the termination or expiration. If challenged, the purchase price will be determined by an appraiser designated by us, with costs and fees shared equally by both parties. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–51)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, if Cream exercises its option to purchase a franchisee's shop, the purchase price for the tangible assets will be based on the net realizable value of those assets, determined using the liquidation basis of accounting.
Cream has the option to purchase the assets of a Cream shop, including the premises if the franchisee or an owner/affiliate owns it, upon the termination or expiration of the Franchise Agreement. Cream must provide written notice of its election to purchase within 30 days after the termination or expiration of the agreement.
If the purchase price is challenged, it will be determined by an appraiser designated by Cream, and the costs and fees of the appraiser will be shared equally between Cream and the franchisee. While Cream is deciding whether to purchase the shop, it may operate the shop on an interim basis, as provided in the Franchise Agreement. This process ensures that the franchisee receives fair compensation for their tangible assets while also allowing Cream to maintain operations during the transition period.